I spend a lot of time using My Own Advisor to share what’s working with our financial plan and how incremental money management changes are moving us towards financial independence. I’ve also shared some money management mistakes on this site. I do this because I believe most people learn more from their failures than their successes…at least I do. Writing about success and failure can be helpful because money affects our lives in so many different ways: how we save, how we invest, what we shop for, where we spend our money, what products and services we buy, what entertainment we are willing to pay for and much, much, more.
For today’s post I thought I’d write about some personal finance a-ha moments. Hopefully you can learn a few things from me and you can share your own moment or moments in a Comment below, in a Tweet, on Google+ or a Facebook Like with me.
Insanity: doing the same thing over and over again and expecting different results.
– Albert Einstein
- Buying mortgage life insurance is bad – I held mortgage life insurance many years ago but I think this is the wrong product to own for many reasons. I think most homeowners are better off with individual life insurance instead. Never again.
- Buying penny stocks is very bad – I bought a couple of penny stocks in my 20s, hoping they would skyrocket in value over time. I’m still working today, so guess how those speculative adventures turned out? Never again.
- Investing in high-priced mutual funds is also bad – I invested in mutual funds that charged money management fees close to 2% throughout my 20s and into my early 30s. I simply had no idea at the time how much those fees would eat into my investment returns. Never again.
- Keeping my investment costs as low as possible is ideal – Good financial advice can be hard to find. This is largely why I’ve decided to become a do-it-yourself investor, trusting my own money management abilities. As part of this process I’ve learned money management fees and trading costs will kill a portfolio so I’m keeping my investment costs as low as possible for as long as possible. I’ve decided to buy and hold a number of stocks for the long-run and use low-cost investment products like Exchange Traded Funds (ETFs) across our portfolio.
- Not tracking my expenses is another bad – I’m not a zealot for budgets but on the other hand I’m convinced you need to know what your expenses are. I didn’t track my expenses in my 20s very well however for the last 7-8 years I’ve been more diligent in forecasting where my money goes and been wealthier for it.
- Accelerating my mortgage payments are very good – I’ve come to realize while some forms of debt can be good (debt used to pay for an appreciating asset (like a house)) long-term debt is generally bad because it limits what you can do with your cash. We can’t wait to kill our mortgage and be debt-free.
- Paying myself first is essential to financial freedom – Like any bill payment, once it’s paid, you rarely get an opportunity to get your money back. I consider bill payments to myself an obligation not just a good thing to do. Paying Us Inc. is critical to our financial well-being.
Over the years, I’ve realized there is no magic bullet to getting rich quickly. There are however some keys to getting wealthy eventually. This is what I’m focused on. This means focusing on paying ourselves first, killing debt, understanding financial products and staying invested for the long-term using low-cost products. In the end maybe these are not so much a-ha moments as they are financial truths.
What are your personal finance a-ha moments?